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UNITED STATES EX REL. I.B.E.W.

January 28, 1997

UNITED STATES OF AMERICA ex rel. I.B.E.W., AFL-CIO, LOCAL UNION NO. 217, et al., Plaintiffs,
v.
G.E. CHEN CONSTRUCTION, INC., et al., Defendants.



The opinion of the court was delivered by: LYNCH

 I. INTRODUCTION

 Plaintiffs in this action are the Carpenters Union Local No. 217 ("Union") and Bo Lian Zhu, Xi Rong Zhu, and Xi Feng Zhu. They have brought this qui tam suit against G.E. Chen Construction and Chun Yi Chen. Counts One and Two of the complaint are brought under the False Claims Act, 31 U.S.C. § 3729, ("FCA"); Count Three was brought under the California False Claims Act, Cal. Govt. Code § 12650 et seq. The remaining causes of action allege various state law violations.

 Defendants filed a motion to dismiss the state and federal FCA counts. The matter came on for hearing on January 24, 1997, with all parties represented by counsel.

 II. DISCUSSION

 A. Standard of Review

 Defendants have moved to dismiss plaintiffs' claims for lack of subject matter jurisdiction and for failure to state a claim on which relief can be granted pursuant to Fed. R. Civ. P. 12(b)(1) and (6). In reviewing a motion to dismiss, the Court considers the allegations contained in the complaint and exhibits attached to the complaint. See, e.g., Hal Roach Studios v. Richard Feiner & Co., 896 F.2d 1542, 1555 n. 19 (9th Cir. 1990). The complaint is construed in the light most favorable to plaintiffs, and the allegations of the complaint are taken as true. Scheuer v. Rhodes, 416 U.S. 232, 40 L. Ed. 2d 90, 94 S. Ct. 1683 (1974). The Court reviews defendants' motions under this standard.

 B. Misclassification Claims

 Plaintiffs' complaint contains a number of allegations relating to defendants' conduct with respect to federally funded Airport Noise Insulation Project contracts. Plaintiffs allege that defendants made false claims for payment and prepared false records in the following ways: (1) misrepresenting the actual wages paid to workers; (2) directing its employees to lie to government inspectors about their hourly wages and the hours they worked; (3) underreporting the number of hours worked by employee; (4) misclassifying the crafts performed by each worker; (5) failing to pay the overtime premium rate; (6) failing to issue paychecks; and (7) preparing false payroll certifications.

 Defendants move to dismiss Counts One through Three, arguing that the Court lacks subject matter jurisdiction over plaintiffs' claims. Defendants cite United States ex rel. Windsor v. DynCorp, Inc., 895 F. Supp. 844 (E.D. Va. 1995). In that case, the court carefully examined allegations that DynCorp submitted false claims when it misclassified the crafts performed by its employees and held that these allegations could not form the basis of an FCA case. "It is impossible to determine whether DynCorp submitted a false claim to the government without first determining whether DynCorp actually misclassified an employee in a given instance. And, the responsibility for resolving such disputes rests not with the courts, but with the Department of Labor." Id. at 851. Pursuant to the Davis-Bacon Act, 40 U.S.C. § 276a, disputes regarding misclassification are committed solely to the Department of Labor. Id. DynCorp held that permitting claims regarding misclassification

 
to go to a jury would result in bypassing the carefully crafted administrative scheme for resolving Davis-Bacon Act classification disputes. Contrary to this scheme, a jury, not the agency, would listen to testimony of employees regarding the work they performed on various dates and then determine the appropriate classification for any given task by reference to the Department of Labor's complex classification.

 Id. at 852. DynCorp therefore concluded that "the Department of Labor has sole responsibility for resolving classification disputes under the Davis-Bacon Act." Id.

 This Court finds the DynCorp decision both well-reasoned and persuasive. The Court therefore finds that to the extent that plaintiffs' FCA claims are based on allegations that defendants misclassified employees, it lacks jurisdiction to decide those claims. Instead, those claims must be brought to the Department of Labor. However, it is an open question as to whether plaintiffs can bring FCA claims based on misclassification after they have exhausted the Department of Labor's remedies. The Court does not decide that question here, but instead will dismiss plaintiffs' allegations regarding misclassification without prejudice.

 However, in addition to alleging misclassification, plaintiffs additionally claim that defendants submitted false claims and false records in that they misreported the wages they actually paid workers, underreported hours worked, failed to pay workers overtime, failed to issue paychecks, directed workers to lie to government inspectors, and prepared false payroll certifications. These allegations do not depend on any determination of the ...


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